Avanza Bank Holding AB

STO:AZA

Earnings Call Transcript 2020-Q1

[Operator]

Hello, everyone, and welcome to the Avanza Interim Report January to March 2020. [Operator Instructions] Today, I'm pleased to present Rikard Josefson, CEO; and Birgitta Hagenfeldt, CFO. Please go ahead.

[Rikard Josefson, Chief Executive Officer]

Okay. Good morning to you all, and thank you for listening in. I expect that some of you are working from your homes as is 85% of the staff at Avanza at the moment. And I hope that in this testing times, you all and your families are doing well despite the crisis that we are living in the COVID-19.If we get going on a business update, on Page #2, where you saw the strong customer growth throughout the quarter. We had a fantastic quarter when it came to new customers. We started the quarter quite well in January, February. And I'd like to emphasize the fact that the growth in number of customers -- of course, March was exceptional, but we had a good start of the year in January, February. And the corona crisis hit Sweden, I would say, in week 9, so pre the crisis, the start of the year was quite well. We got about 156% more clients than comparable quarter '19. And compared to Q4 '19, it was up 131%. We can see that the new clients is, as always, a bit tilted to the younger age groups. There are no difference with the new clients as with the old clients, but a slightly higher increase in the age group 41 up to 50, during Q1, which is, of course, good news for us. Slightly higher, more male customers than female customers, which, of course, is something we would like to have an equally new men and women as customers.Also, of course, number of customers -- becoming customers through mobile devices is still increasing. My personal reflection is also, I think, that a lot of people working at home has actually been beneficial for us because people might have a little more time to take care of the personal finances, opening new account and get going on the Avanza platform.If we go to Page #3, we look at the high net inflow for the quarter, which is also on a record level by far. And as I said, among new clients, we also saw January, February up until week 9, very strong net inflows and, of course, exceptionally strong net inflows in week -- in March, but we are also up 189% when it comes to net inflows to Q1 '19 and 221% compared to Q4. If you look at the savings capital total in the company, it's now SEK 368 billion, which is, of course, a little less than in the beginning of the quarter, but it's the same level as we had in August '19. So of course, our savings capital has been a bit hurt by the stock market going down, but at the same time, the levels are quite high.We can also see a higher number of new clients coming in buying equities, and also the clients have a very high liquidity during the quarter. So there's a lot of money on the sideline waiting to be invested. And 62% of the net inflow was from the existing customer base. So that means that people are trusting us with more and more of their savings, which is, of course, also very good news for Avanza.If we go to the next slide, it's Slide #4, record high activity throughout the quarter. And of course, it's been a turbulent quarter as has been in the whole economy in the whole world, but as I said before, high activity in January, February. The number of clients generating equity trade was record-high, 34% up quarter-to-quarter and commission generating notes was up quarter-to-quarter 90%. So that's been an unheard-of quarter when it comes to activity.Our IT systems on the platform had throughout the quarter worked well. We had an availability on the site of 99.8%, but we did have some hiccups during the quarter when the load on the systems became too much. But it was only a small period of the time during the day and especially in the morning that we had some lag in the systems, but we have fixed those problems. And for the last 3 weeks, everything has been working exceptionally well.Going to the next slide, of course, it's an interesting slide for us because we can see that we are gaining market share in number of transaction compared to our competitors, which is, of course, important for us. And it's good news, and it also shows that our customer is trusting us in these days. They are reallocating their portfolios. They are using the Avanza platform. And when it comes to turnover, we also are happy that we have surpassed SEB, and we are now also the #1 on the stock exchange when it comes to turnover, which is, of course, also good news for us.Going to the next slide. Of course, on Page 6. We had made a little less new launches during the quarter and emphasis -- and focused a lot on customer communications. We did a lot of blogs, a lot of quotes with record-high listening and reading of those, so people were really seeking information, education and somewhat inspiration. We did launch our European index fund, which we think is a very good part with -- very good part in a puzzle when it comes to long-term investment, even though, of course, the fund has gone down since we launched it. We have improved the fund pages, especially when it comes to sustainability data. We added more than 800 new ETFs on the platform. We had small improvements on the site, and we have supported our clients. And the publishing is up 113%, and over 850 people were listening to our pods in the Q1. And also, there were 1.7 million customers visiting the Avanza blog, and that's up 175% since last year. So we have been there for our clients. We have talked to them. We have been in social media supporting them and intensified our communication with them.Going to the next slide. Further investment to ensure continued high customer satisfaction. Of course, as we stated, we are adding about SEK 10 million when it comes to cost during 2020. Most of it will probably come in the second half of the year because it's very much about scaling up IT, hiring more people and the number of clients, and number of activity, we also see a demand of scaling up a bit on our back-office, private banking and customer services and IT. And we -- this is nothing that's new for us. I would say that all these costs increases have been in our plans or the midterm plans, but we took the decision to front-load these costs and do it now. And that is, of course, a reaction to the very high activity that we felt we need to make this investment in further growth a little earlier than we expected.If we go to the next page, #8. Of course, how sustainable is the Q1 results and activity going forward after the COVID-19 crisis? Okay, we believe that we have raised the bar. We know that we have more clients. We have a lot of savings capitals on the platform. We are growing. And we believe that -- very strongly that even though if we go into a more boring market, we're going to see that the customers' activity will be higher than in boring market previously. So the lowest level of Avanza, I'm convinced we have increased that.Of course, we can also expect some marginal effects in the pension business because some of the corporate customers might go bankrupt or tend to not paying as much pension as they used to for liquidity reasons. And we also can see that the high liquidity is expected to gradually be reinvested in the market, which is, of course, driving activity. We had high outflows from funds in the beginning of March, but we can see at the end of the quarter that, that's turned around, and the customers are coming back in the mutual fund business. Also, we expect that to be quite sustainable going forward.If you go to the next page on #9, of course, we believe continued low interest rates will be there for foreseeable future. The risk of the Riksbank, we've put in a negative rate again, it doesn't feel very strong today. I was more concerned with that a few weeks ago. But the underlying reasons for people taking care of their own savings is still there and maybe stronger than ever because a lot of people became unemployed or temporary out of work, and to have a buffer in your economy, to have a savings capital is more important than ever. And we can also see a very strong increased focus on sustainable investments going forward.And at the last slide, of course, the key focus is for us, continuous growth, customer satisfaction, being there for our clients and keep on innovating, keep on improving, keep on being there for our customers with innovating tools, education and inspiration. And as always, the employee engagement is key to drive this success for us.And with that note, I will turn over to Birgitta.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

Thank you, Rikard. And as always, we start with the financial overview. We have seen record-high revenues in the quarter, up 65% compared to Q4 and more than double compared to Q1 last year. Operating expenses decreased compared to Q4, mainly due to the extraordinary write-down on leased assets of SEK 8.3 million we had in the fourth quarter. Excluding the write-down in Q4, expenses were stable. Compared to Q1 last year, expenses increased by 9%, primarily caused by higher number of employees.Despite the turbulence in the stock markets, we had no credit losses, which shows the low risk in the balance sheet and that the collateral and the relative processes are working the way they should, even when it's very uncertain and volatile market conditions.The operating profit increased by 261% compared to last year. And consequently, the operating margin for the quarter improved to 67%. Revenues per savings capital was up by 22 basis points to 56, and costs per savings capital decreased slightly to 18 bps. The long-term ambition is to lower the cost per savings capital to close to 16 basis points. Even though the volatile market has hit our customers' investments, total savings capital is at about the same level as at the end of August last year.As of 2020, we added a return-on-equity target to our long-term goals. The target is to have a return on equity between 25% and 30% the coming 5 years. Due to the record-high revenues in the quarter, return on equity for Q1 reached 47 -- 64%, and earnings per share was SEK 198 million.If we look at the quarterly revenues, you can see that Q1 is extraordinary. As I said, we had exceptionally high revenues in the quarter, which were up 65% quarter-on-quarter. Net brokerage income more than doubled compared to Q1 and Q4 last year as a result of record high trading activity. Customer activity was high already in January and February and increased even further in the end of February and March after the COVID-19 outbreak. Commission-generating turnover increased by 90%. The number of commission-generating notes by 96% compared to Q4. Brokerage income per turnover krona increased from 9.8 to 10.8 bps since a higher share of the brokerage income was generated in lower commission fee classes, which means that it wasn't only the professionals that acted on the stock market but a much broader group of customers. The number of commission-generating customers was once again record high with an increase of 34% from Q4.Fund commissions increased by 5% quarter-on-quarter, mainly due to higher average fund capital. Capital was high during January and February, but then decreased significantly during the fall of the stock market and net sales. Income per SEK of fund capital increased slightly to 33 basis points despite an almost unchanged share of index funds. Fund commissions year-on-year was higher due to higher average fund capital. Customer net sales during the quarter, which resulted in lower fund volume, will affect the fund commissions in the coming quarters if customers don't start to invest soon again.The NII increased by 26% quarter-over-quarter, an effect of higher lending rates in connection with the repo rate hike of 25 basis points in January.Average STIBOR 3 months was 19 basis points higher than in the fourth quarter, which also improved the return on surplus liquidity. The surplus liquidity is managed overnight and through investments in primarily covered bonds with an average interest duration of 3 months linked to STIBOR.All else equal, without taking changes in customer behavior into account, a 1 percentage point change in the repo rate with today's volume and our customers' current high -- all-time high share of liquidity would affect full year net interest income by around SEK 450 million to be compared with SEK 300 million at year-end.Most of the increased surplus liquidity is invested in instruments with very short maturities, where returns are lower. Therefore, we now have treasury bill from our balance sheet yielding according to repo rates. The reason is to be prepared when customers increasingly start to invest again.Times are very uncertain and hard to predict at the moment, but the Riksbank's own forecast indicates a rate hike at the end of 2022.Compared to Q1 last year, NII increased by 87%, mainly due to better return of surplus liquidity as the repo rate was raised by 20 basis points in January 2020, but also the rate hike we had in January last year. Higher lending volumes also contributed positively.Other income increased by 85% quarter-on-quarter, mainly due to significantly higher currency-related income where customers' increased trading activity also has affected trading in foreign securities. The high activity is also reflected in the income from Avanza Markets, which also rose substantially.Corporate Finance has also a good quarter like in Q4. Compared to Q1 last year, fixed -- FX-related income increased significantly and income from Avanza Markets and Corporate Finance also increased.Looking at the costs. Operating expenses decreased by 4% compared to Q4, and as I mentioned before, this is mainly due to the extraordinary write-down of leased assets of SEK 8.3 million in the fourth quarter. If we exclude the write-down, total expenses were unchanged. Marketing costs, which are normally higher in the beginning of the year, increased, while other expenses decreased slightly. Compared to Q1 last year, expenses increased primarily due to increased development capacity with a higher number of employees and higher other costs.As communicated in the end of March and as Rikard mentioned, we have raised our cost guidance for the year to a growth of 12% instead of 10% compared to last year. This means an additional cost of SEK 10 million, with a big part of personnel costs and other costs, which primarily occurs in the second half of the year.The capitalization is still strong, with a total capital ratio of 18.1 to be compared with the requirement of 14, including all external and internal buffers as well as Pillar 2 requirements. The regulatory requirements are lower compared to December since the contracyclical buffer was lowered from 2.5% to 0% due to the uncertainty around the aftermath of the corona crisis.The LCR ratio increased during the quarter as a result of the increased deposits from customers. The leverage ratio though was negatively affected by the increased deposits. A regulatory requirement for the leverage ratio of 3% will be introduced as of June next year. We are currently discussing the level of the ratio, including an internal buffer we would need, taking the volatility in the deposits into account. This will be communicated well in advance of the requirement being introduced. Avanza's leverage ratio can be approved through increased Tier 1 capital and/or by reducing the balance sheet and off-balance sheet commitments.As you have seen, we announced that I will leave Avanza in about a year from now. I've been working at Avanza for 12 fantastic years and decided long time ago to not continue in an operating role for longer than the summer '21. This has been tremendous years, and I love Avanza, so leaving will be very double-edged for me. But I'm convinced that I will leave the company in the hands of a strong and competent management team that will take Avanza to new levels.And with that, Rikard, I think we can open up for questions.

[Rikard Josefson, Chief Executive Officer]

Thank you. Absolutely.

[Operator]

[Operator Instructions] The first question is from the line of Patrik Brattelius from ABG.

[Patrik Brattelius, Analyst]

Rikard, you write in your CEO comment that you expect to see a more passive period going forward. Could you elaborate a little bit what you mean by that, and how you expect it will affect your P&L primarily than your income side?

[Rikard Josefson, Chief Executive Officer]

What I believe is that when you have a turbulence in the market that we have right now with this extreme volatility and activity, of course, there will be a period after the crisis where volatility will go down, activity will go down, and that will, of course, affect us when it comes to net brokerage income. It could -- how it will play out with the mutual funds, we will see because I still believe that people are coming back to mutual funds. And also, of course, it's affected about the levels of the valuations. But as I said, I believe that -- very strongly that we have raised the bar for Avanza because with the fantastic customer base of over 1 million clients, with a substantial amount of asset under management, there will still be more activity on the platform than it usually is when the times are -- get a bit boring. But of course, the brokerage income in the short term is what is at stake a little bit when it comes to activity going down. But we have more clients than ever generating brokerage income, so the fall will not be as big as it has been previous times.

[Patrik Brattelius, Analyst]

Yes, I understand. And regarding the strong customer inflow then, are you seeing that a lot of the clients are coming into the open banking app? Or is it through more traditional ways?

[Rikard Josefson, Chief Executive Officer]

To become a client, you need to identify yourself with mobile bank idea. So there is only 2 ways of becoming a client, to put this simply, through the web or the mobile app. And what we stated is that we can see that more and more clients are becoming clients using the mobile devices than it was previously.

[Patrik Brattelius, Analyst]

Okay. But I was thinking this, will you transfer your account from other banks?

[Rikard Josefson, Chief Executive Officer]

Yes, but you have to be a client to be able to do that. So first, you have to become a client of Avanza, then you use mobile bank idea to transfer your funds from other bank. And of course, that's an increasing activity, which is one part of the puzzle where we can see the strong net inflows.

[Patrik Brattelius, Analyst]

Okay. And lastly then is regarding activity. Can you say anything about the activity level we've seen the last 3 weeks?

[Rikard Josefson, Chief Executive Officer]

Not anything more, but you can see that the volatility is there, the turnover, the stock exchange is there. So the activity is still high.

[Operator]

And next question is from the line of Peter Kessiakoff from SEB.

[Peter Kessiakoff, Research Analyst]

Yes. So first of all, just a follow-up question from Patrik's and perhaps rephrasing his question a bit. The tool that you launched, was it a year ago or so, which enables you to transfer money from other banks on to Avanza's platform in a very convenient way, and I think I've asked this question each quarterly report since that tool was launched. But do you see that, that has had an impact in terms of the high inflows that you've seen in the quarter? And especially the fact that you're mentioning that you're seeing existing clients transfer more money onto the platform than we've seen recently? Or is it just the ordinary kind of people just transferring cash onto your platform like they've always have?

[Rikard Josefson, Chief Executive Officer]

It's one -- it's an important piece of the puzzle, but I wouldn't say that, that has been the way to fame for the net inflows, but of course, it helps us.

[Peter Kessiakoff, Research Analyst]

Okay. So it's a smaller positive contribution, but it doesn't stick out. Then...

[Rikard Josefson, Chief Executive Officer]

I would say it's a positive contribution, absolutely.

[Peter Kessiakoff, Research Analyst]

Okay. Then in terms of the inflows, because it's -- they have been, I must say, great so far this year, also pre-COVID-19. Is there anything -- there's nothing in particular in terms of single clients transferring a lot of money onto your platforms or any partnerships that are relevant to take into account when looking at the inflow level that we've seen so far this year?

[Rikard Josefson, Chief Executive Officer]

No, it's been a broad inflows. Of course, we can see that we are also gaining private banking clients, so we have -- some of these clients have sort of substantial amount of money because a lot of people, in my opinion, believes that private banking has not been so active, and they get a bit -- want to see what the alternatives are. So the inflows have been very broad.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

But then again, the private banking part of the total net inflows are not substantial.

[Rikard Josefson, Chief Executive Officer]

Naturally.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

So it's absolutely a broader number of customers putting in a lot of small numbers of inflows that's achieving this.

[Peter Kessiakoff, Research Analyst]

Yes. I know that kind of standard clients had a significant inflow as well. But there's nothing underlying in that, that is relevant to highlight them. Okay.

[Rikard Josefson, Chief Executive Officer]

No.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

No partnerships, no special -- big installments.

[Peter Kessiakoff, Research Analyst]

Okay. Okay. Then just in terms of marketing, has there been any kind of thoughts around increasing the marketing spend? I mean, that's -- I think we've seen a bit more ad campaigns, et cetera, from Avanza perhaps the last year than we have in the years prior to that. But in terms of increasing that spend in order to drive inflows, is there any consideration down there?

[Rikard Josefson, Chief Executive Officer]

No. We have a marketing plan, and we're sticking to that. We have not revised it. And as we discussed previously, I think the biggest marketing we have is word of mouth, especially these days.

[Peter Kessiakoff, Research Analyst]

All right. Then just a final question, and that comes back to the leverage ratio, which is now at 2.5%. And as you mentioned, Birgitta, that there's a binding requirement of 3% in roughly a years' time. In terms of -- and you mentioned which levers you can pull in order to improve the leverage ratio. But I guess coming back to kind of the fact that it's a binding requirement means that you want have a good buffer also in times -- in stress, such as we're seeing right now. Is there kind of any consideration done in terms of perhaps overissuing additional Tier 1 capital or perhaps holding back on the dividend in terms of improving the ratio and the resilience of that? Or do you think that you're able to offset a lot or improve it a lot by, for instance, reducing off-balance sheet exposures or pulling other levers?

[Birgitta Hagenfeldt, Deputy CEO & CFO]

Well, that's the question that we will discuss internally going forward, of course. But just to set the ground here. We have 2.5% today. We haven't been working actively in order to improve that, which we actually could have done by the end of the quarter. So if the requirements were binding by this time, we would -- we could have made actions within our current balance sheet in order to get the leverage ratio beyond or higher than 3%. So even though we have this stress on us, which we have had during this part and where customers are now having so much liquid assets, we still can keep the leverage ratio at 3% or above 3%. But then again, as you said, we will need to have a buffer to make sure that if anything like this happened again -- happens again, and if that should be by lowering the dividend, issuing Tier 1 capital or decreasing our balance sheet, that's what we are going to discuss, both the mechanism and, of course, the level of the ratio. We will come back to that later in the fall.

[Rikard Josefson, Chief Executive Officer]

But we will communicate it long before the requirements are in place.

[Peter Kessiakoff, Research Analyst]

Of course. May I just follow-up a small detail on that? Is it possible to quantify or mention some of the kind of levers that you think you could have pulled in Q1 in order to improve the ratio?

[Birgitta Hagenfeldt, Deputy CEO & CFO]

We could have moved more of our insurance company's liquidity from the bank's balance sheet, which had left the consolidation -- consolidated group's balance sheet smaller. We could also had our auditors to audit our first quarter results, which could mean that we could include the revenues or the results from the quarter in the calculation of the capital base. So there are different things that we could have achieved already with the balance sheet that we have today.

[Peter Kessiakoff, Research Analyst]

All right. Okay. That -- those were my questions. And kind of -- finally kind of, Birgitta, sad to see you leaving, but job well done over the years, and I'm looking forward to talking to you in the coming quarters as well before you leave.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

Thank you, Peter.

[Operator]

Next question is from the line of Nicolas McBeath from DNB.

[Nicolas McBeath, Analyst]

So first, a question on the fund commissions here in the quarter, if you could explain why the funds is in relation to some capital increase, and if you could also comment on the business mix trends you see in this business. I was a bit surprised to see the increase in funds in relation to fund capital, as I think normally when you have this type of market, customers change into more low-fee products in market declines.

[Rikard Josefson, Chief Executive Officer]

And I would say that one thing is that the -- as we said during the presentation, the fund outflows came in March. We had good fund months in January, February, and we get paid every day in the fund commissions that we are making.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

And I also would say that the customers did sell out their hedge funds investments. It was a mid part of the funds that actually -- it wasn't the low-index funds, and it wasn't the hedge funds investment. It was more a fixed income funds and so forth.

[Nicolas McBeath, Analyst]

Could you comment on -- if you take a snapshot of the business mix at the end of the quarter in the fund business, is that generating a lower fee in relation to the fund capital than the average in the quarter, so to speak?

[Rikard Josefson, Chief Executive Officer]

Too early days to say. What we said during the presentation is that we see that the fund flows in the end of the quarter is starting to come back. I don't have the information exactly how the customers are -- which kind of fund types they are investing right now.

[Nicolas McBeath, Analyst]

Okay. And then a question on the net interest income. If you could comment if the rates hike, is it fully reflected in the Q1 NII level. Or do you expect a further sequential boost to the Q2 NII like you had last year after the rates hike due to how the liquidity portfolio is maturing, et cetera?

[Birgitta Hagenfeldt, Deputy CEO & CFO]

Well, I would say that the impact of the rate hike hit us pretty early this quarter since -- when it comes to the bond market, they already made that change in the end of Q4. So I would say that we don't have anything that is rolling over to the next quarter.

[Nicolas McBeath, Analyst]

But did you have anything rolling over in Q1, which then wasn't fully reflected in the Q1 results?

[Birgitta Hagenfeldt, Deputy CEO & CFO]

I wouldn't say that. I would say that we don't have anything that will come as a consequence afterwards. I think they are fully affected.

[Nicolas McBeath, Analyst]

Okay. And then also a question -- I mean, looking at the Q1 results, very high activity and profitability, as I mentioned, ROE of 64%. Probably that's going to decline eventually. But could you consider -- if activity and profitability stays elevated, could you consider then lowering prices on, for instance, brokerage to not overshoot your ROE targets? Yes.

[Rikard Josefson, Chief Executive Officer]

I would say that's probably more related to the profit margin that we have, and of course, the profit margin is extremely high during the quarter. And if this was to be a profit margin that would stay on that level going forward, we would absolutely further invest some of our profits in further growth. That means lower prices, small innovation, more investments, whatever that could be. But I wouldn't take the first quarter and just prolong it, and this is not the new normal.

[Nicolas McBeath, Analyst]

No.

[Rikard Josefson, Chief Executive Officer]

That's a good question. But of course...

[Nicolas McBeath, Analyst]

I agree. And then finally, a question on the Corporate Finance business. You had strong Corporate Finance sales in Q1, I think, considering the market conditions. Do you think this performance reflects investments you have made into this business over the past year? Or is it more a coincidence of the lumpy sales book in this business? And then if you could also comment on the pipeline for Corporate Finance revenues for the remainder of the year, if that's been impacted now a lot by the COVID-19 situation.

[Rikard Josefson, Chief Executive Officer]

I would say that we had a good Q4, good Q1 when it comes to Corporate Finance. It has absolutely a reflection of the team that we have hired that will do this for us. We have developed our offering in Corporate Finance. So I'm very happy with the development up until Q1. But going further this year, looking at the IPO market and all these things, the uncertainty are extremely high. So I have no guess what the Corporate Finance market will go for this year. But the Corporate Finance people, they meet their clients or they have Zoom meetings with their clients. We are very active in building the relationships so we will be in a good position once the IPO market gets back, but I have no idea when that would be. So of course, the expectations going further for Corporate Finance rest of the year, the uncertainty is extremely high, especially in that type of business.

[Nicolas McBeath, Analyst]

Okay. And then just a final question as well, if I may. So other commission expenses, you write in the report, decreased due to offloading of the administration of the Stabelo mortgages. If you could just explain why these were changed -- this was changed during the year? If there's any change in the way that you view the business or cooperate with Stabelo, and also how much this administration cost was that on a quarterly basis, which was handed over to Stabelo?

[Rikard Josefson, Chief Executive Officer]

Nicolas, yes. The reason that we changed it was that we had a -- was administrative, complicated relationship with Stabelo that was set up when we started that business. That was more a gross where we got the commission and we paid some of the costs. Now we have a business model that we changed where we get an income and they take all the cost. So that was the reasons why we did that. And on the numbers in it, we will not comment on that.

[Operator]

[Operator Instructions] Next question is from Jens Hallén from Carnegie.

[Jens Hallén, Research Analyst]

Just one clarification on the brokerage revenue. And I mean I understand your general comment that after such a turbulent time, it would be slow in the future. But is that -- are you talking already about Q2? Or you also mentioned volatility has been high so far in April, so that we could perhaps expect a pretty decent Q2 as well?

[Rikard Josefson, Chief Executive Officer]

No. What I said is that we have a high turnover to stock exchange, and we have volatility in the market. And having those, you say, combined is also in the market, generally speaking, high activity. That's the only general comment that I made.

[Jens Hallén, Research Analyst]

Okay. Fine. Then I have a question on the capital -- on the leverage ratio. You talk about things you can do, putting maybe some of the deposits with third-party providers. Do you make a margin or do you take a fee to do that? Is that income-generating?

[Birgitta Hagenfeldt, Deputy CEO & CFO]

No. No, it's just having our insurance company's customers' deposits in another bank, in an external bank account instead of on Avanza balance sheet. So there's no fee connected to that. It's more than the revenues or the returns that we can get on the deposits from the third bank.

[Jens Hallén, Research Analyst]

Okay, fine. And then just one question also on costs. You increased the guidance to -- or your expectations to 12%? We didn't see that coming to then in Q1. Expectation for then Q2 to Q4, should we just model an even split of those investments? Or will it be a sort of a more H2 effect?

[Birgitta Hagenfeldt, Deputy CEO & CFO]

Since we are actually -- I mean, it's a lot of hiring people, and it takes time to get them in place and get the costs in place. I would say -- since I said it's -- more part of it will come in the second half of the year and probably even a little bit end-loaded to the fourth quarter.

[Jens Hallén, Research Analyst]

Okay. Okay, perfect. And then just a final comment -- or final question, I should say, on the fund provision. Given that you effectively get a revenue per day, is it something that we should think about then when we're looking at Q2? We're starting with a lower volume so that's like we saw after Q4 '18. We actually saw a decrease in nominal terms for the following quarter. Will that be something that should be repeated then for Q2 '20?

[Birgitta Hagenfeldt, Deputy CEO & CFO]

I'm not sure I understand your question. Could you say that...

[Jens Hallén, Research Analyst]

Sure. It's more like, it was a strong performance, and you explained why, that January and February were strong months. That's why we had a Q-on-Q increases in funds commission. And for Q2 this year, we're starting from a considerably lower level. So that the amount of revenue should actually reduce in nominal terms and let's say we start to invest a lot and the current amount of revenue should be down.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

Yes, that is of course -- since we are starting up on lower levels, and then, of course, it depends on what customers do. I mean we are still pretty early in the Q2. So if customers reinvest the investments in funds again, so whether we will actually have a increased turnout from commissions for the quarter as, of course -- it's not something that we could comment on, but we are starting from a lower level when it comes to assets under management within the fund part.

[Jens Hallén, Research Analyst]

Okay. Perfect. Then, of course, we will have to follow on and see what's happens. And those were all my questions.

[Operator]

And there are currently no further questions registered, so I'll hand the call back to the speakers. Please go ahead.

[Rikard Josefson, Chief Executive Officer]

Okay. Thank you very much for listening in on the call, and I hope you all continue to have a great day. Thank you.

[Birgitta Hagenfeldt, Deputy CEO & CFO]

Thank you. Bye.

[Operator]

This concludes the conference call. Thank you all for attending. You may now disconnect your lines.